By: Robert J. Nahoum
New York Chief Judge Jonathan Lippman announced that new rules have been adopted to prevent the entry of unwarranted default judgments in the 100,000 plus debt collection cases filed yearly in New York state courts.
According the Chief Administrator’s office, “the new rules reflect the most comprehensive effort by a court system nationally to ensure a fair legal process in consumer debt litigation, building on the collective efforts of the Attorney General’s Office, the State Department of Financial Services and the State Legislature to combat deceptive debt collection practices and protect consumers.”
The new rules address a number of known abuses including default judgments obtained on the basis of deficient or incorrect factual proof or hearsay testimony; default judgments granted in cases where the statute of limitations had expired; and failure to provide consumers with a notice of lawsuits started against them.
While creditors have every right to collect what is legally owed to them, the Judiciary has an obligation to prevent inequitable debt collection practices in the courts. The adoption by the Unified Court System of these rigorous new requirements will undoubtedly avert unwarranted default judgments in consumer debt cases and serve to protect the rights of all New Yorkers, including some of our most vulnerable citizens, said Judge Lippman.
The new rules include:
- A requirement that creditors submit affidavits containing detailed proof in support of default judgment applications, including the validity of the debt at issue and the chain of ownership for that debt.
- In actions started by third-party debt buyers, affidavits the original creditors and all intervening debt buyers, executed by individuals having personal knowledge.
- Copies of key documents must be attached to the affidavits, including the credit agreement, the most recent monthly statement and other documents that identify the correct defendant, the last four digits of the account at issue, a final itemized summary of the balance allegedly due and the complete chain of ownership for the debt reaching back to the original creditor.
- To prevent the abusive practice of suing on time-barred debts, debt collection lawyers must submit an affirmation that the statute of limitations has not expired.
- To ensure that defendants receive notice of a lawsuit, the debt collection lawyers must provide the court with an additional notice of the lawsuit to be mailed by the court to the defendant at the address where process was served. No default judgment will be entered if the notice is returned to the court as undeliverable.
The new rules take effect on October 1, 2014, except in debt buyer cases, where the rules will apply to default judgment applications involving debt purchased from an original creditor on or after October 1, 2014. Effective July 1, 2015, the new affidavit requirements will apply in all debt buyer actions regardless of when the debt at issue was purchased.
If you need help settling or defending a debt collection lawsuit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.